UNNECESSARY IMAGING Up to $12 Billion Wasted Each Yearresearch and report provided by ReactionData

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Table of Contents!

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Introduction 3

You Can Use it Too! 3

Executive Summary 4

Unnecessary Imaging is a Serious Problem 6

The Questions 8

How Big is the Problem? 9

Low End 9

High End 9

The Range 10

What Causes This Problem? 11

Who has Solved It? 13

Managing Radiology and Imaging 13

Electronic Ordering Totals 13

RBM, ACO, or Other 14

Conclusion 15

Appendix A 16

Survey Participants by Title 16

Appendix B 17

Hospitals That Participated 17

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IntroductionThe world of healthcare is rapidly changing. New legislation, the rise of ACO's, an increasing need for patient feedback and countless other advances have disrupted the industry greatly, and we’re still figuring out all the implications of these disruptions. Healthcare, historically speaking, has always been miles behind the curve when it comes to technological advances but that is no longer the case. There is probably no other industry that is going through as much technical innovation as is healthcare.

I know because I ran research for the most prominent healthcare tech market research firm in the world. I saw that business was speeding up and getting more competitive. This pointed to a rapidly evolving need for much better data, data in much larger quantities while also being very current. So ReactionData was created to do just that. My team built a proprietary ecosystem that gets a remarkable amount of targeted data very quickly (we call lots of specific data that was collected very rapidly Smart Data). Lightning fast data with no researcher overhead is our mantra.

The data in this report, like all other data we collect, is as relevant and fresh as it can be. We don't believe in taking months to mine data and then charging a premium to deliver stale information to our clients. Through this report we prove that it is absolutely possible to get all the data you need in just a matter of days and to illuminate areas of healthcare where timely data could prove useful to vendors and provider organizations alike.

You Can Use it Too!!

Our system isn’t a secret. Many global healthcare companies already use our ecosystem to get the data they need – customer satisfaction, conjoint analysis, win/loss, prospect research, event/trade show feedback and demo scheduling, advertising/message testing, etc.

If you’d like to learn how you can get better, faster data to run your business, shoot me an email or give me a call. I’ll show you how to get Smart Data in a matter of minutes.

Jeremy Bikman

Email: jeremy.bikman@reactiondata.com

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Executive SummaryIf we're being honest, “news” releases on the exorbitant costs of national healthcare spending and its projected growth no longer really count as “news.” We've seen enough headlines and read enough information already to be at least somewhat concerned over the spending trend in our country. If this sounds foreign to you, or if it sounds like we're being overly dramatic, let's introduce a number to this conversation: $2.8 trillion (we left off the zero's to avoid redundancy). That’s how much money the United States (individuals and the government combined) 1spent on healthcare in 2012. That’s 17.2% of the entire United States’ GDP and it is projected to grow every year.

Of this $2.8 trillion, there have been many claims about how much is wasted. On the high end, PricewaterhouseCoopers' Health Research Institute 2argued that $1.2 trillion of it is wasted. A quick smell test tells us that this $1.2 trillion figure is probably high, but either way healthcare is incredibly expensive and waste certainly contributes to its cost. That’s led politicians, journalists, civic leaders, and healthcare professionals to rush to define the problem and provide their own preferred solutions.

This report centers on one lever of this cost, unnecessary imaging.

”We spend in the ballpark of $100 billion a year on medical imaging,” 3said Dr. Rebecca Smith-Bindman, professor at the University of California, San Francisco. “And we need to invest some research dollars to figure out how best to spend these dollars and when to image more and when to image less.”

With so much being spent on medical imaging, we here at ReactionData decided to get to the bottom of this by using our proprietary smart data platform to get feedback from hospital physician leadership.

We collected data from 196 hospital leaders and came to the following conclusions:

• Reducing unnecessary imaging is a top strategic priority for a majority of providers.

• The cost of unnecessary imaging in the United States is at least $7.47 billion each year and maybe as high as $11.95 billion annually, and even that metric may understate the problem.

• Defensive medicine is the most widespread cause of unnecessary imaging. Over 90% of hospitalphysician leadership said it was a prime contributing factor in unnecessary imaging.

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! www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-1Fact-Sheet.html

! http://www.pwc.com/us/en/healthcare/publications/the-price-of-excess.jhtml2

! health.usnews.com/health-news/news/articles/2012/06/12/huge-rise-in-ct-mri-ultrasound-scan-use-study3

• Patient demand also contributes significantly to unnecessary imaging according to 65% of physician leadership.

• A majority of surveyed physician leadership (60%) also indicated physicians being unfamiliar with appropriate diagnostic tests has significantly contributed to this unnecessary imaging.

• Very few providers feel they have developed a homegrown system to correct this problem.

• By and large, the solution to unnecessary imaging at hospitals has been through internal processes, rather than using an outside vendor.

• There is a huge opportunity for a vendor who can create a solution that will address unnecessary imaging, as almost all providers have expressed a need for it.

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Unnecessary Imaging is a Serious Problem

We certainly sympathize with those who believe that Chief Medical Officers, Chief Medical Informatics Officers and other hospital leadership can be some of the hardest people on earth to reach. Still, it was easy for us to set those sympathies aside and use our platform to gather critical information from 196 of them in just two weeks.

First, we had to gain bearing of where these organizations stood in regards to reducing unnecessary imaging. In other words, we wanted to know how much of a priority reducing these wasted costs is for their facility specifically. So, we asked them. (see Figure 1)

Most acknowledged unnecessary imaging is a top priority, but for every respondent who answered no, we then asked why it isn’t. (see Figure 2). We discovered that it in fact was a priority but that it took the back seat to current, more pressing issues in their facility.

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FIGURE 1: Responses to question “Is reducing unnecessary imaging a top strategic priority in your organization?”

Is Reducing Unnecessary Medical Imaging a Priority?!!

0 15 30 45 60

Yes

!!No

Only four hospitals suggested that there were “no indicators that unnecessary imaging is a significant issue here” or that it “has not been a major issue.” Being that only 2% of hospitals felt this way, we wanted to find out if there was some underlying commonality that linked these four together.

We found that the four respondents who said it isn’t an issue represented significantly smaller providers and resided in very small towns. The average number of beds of all 196 providers in the sample was 811. Understanding that the number of beds in any given facility can vary greatly, we thought it 4

appropriate to share that the median was 492. Continuing, we compared this to the mean and median of the four rebels who stood off from the majority.

These four facilities had an average of 353 beds with a median of 372. (see Figure 3) These four facilities are operating on a much, much smaller scale than the majority of facilities in our sample, as well as our nation. Rest assured that there is medical imaging waste at these locations, and significant amounts no doubt, but it's merely gone unnoticed due to the overall smaller amount of services rendered.

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! Bed counts were collected from the 2013 AHA Guide4

Why Not a Top Priority?

FIGURE 2: Response to question “Why is it [reducing unnecessary imaging] not a strategic priority?”

Other 37%

Still focusing on Meaningful Use Initiatives 32%

We don’t know how to tackle it

16%

We already put a solution in place

16%

!One medical director concluded that wasted money on unnecessary medical imaging had “not been a major issue here”. Fair enough. Looking deeper, that hospital was located in a very small town (less than 10,000 people) and was isolated from any neighboring cities (they did have a Walmart, though). Another director shared that there were “no indicators” that money was being wasted on medical imaging. The fact that this hospital was located in a city with a population of ~70,000 did give it more credibility when compared to our prior example, but when compared to another hospital in a city of 600,000 people, with a Chief of Staff trying to make “radical reduction” of “needless imaging”, it highlights how the issue could potentially go unnoticed in smaller facilities. Changes in the way providers are compensated, along with a desire to practice better medicine, have made reducing unnecessary imaging a concern for almost all physician leadership and a top strategic priority for a majority of institutions.

The Questions!

With the knowledge that a majority of providers view reducing unnecessary imaging as a top strategic priority and less than 3% of providers suggested it isn’t a problem, two questions are easily posed:

First, how big of a problem is it? Specifically, how much money does it cost the United States (government and people) every year?

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FIGURE 3: A comparison of the ‘mean’ and ‘median’ number of beds from our entire sample vs. the 4 organizations who said it was not an issue

How Size Affects Prioritization of Reducing Unecessary Imaging

Top Priority

Not Priority

Number of Beds

0 225 450 675 900

Second, what is the cause of this unnecessary imaging? This will give a road map toward correcting the problem.

How Big is the Problem?!

To determine how big the problem is, we combined information from several sources. First, we found multiple sources that suggested the total cost of imaging is approximately $100 Billion per year. 5

Once we had this information, we were able to combine the results of our survey to estimate the amount of waste in our system.

Our mobile platform asked every person for whom reducing unnecessary imaging was a top strategic priority approximately what percentage of their imaging is unnecessary (see Figure 4). We then used this information to create a low-end estimate and a high-end estimate based upon the categories selected. 6

Low End!

On the low end, we assumed the lowest possible figure for each segment (5% for the 5-10% and so on) and calculated an overall percentage based upon the size of the groups. 7

This combined for a total of 7.47% of all imaging. Applying that across the spending, we find that the low-end estimate for cost of unnecessary imaging is $7.47 billion each year.

High End!

With the high-end estimate, we chose the largest number in each segment. For the over 10% group, we chose 15% as the high mark.

After combining these totals, we came up with a total of 11.95% of imaging. This means that our cost estimate for the high end is $11.95 billion.

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! The most prominent source displaying this number is …. http://health.usnews.com/health-news/news/articles/2012/06/12/5huge-rise-in-ct-mri-ultrasound-scan-use-study

! Given that those who said it wasn’t a top priority suggested it was still a problem in line with the results here, we felt 6comfortable projecting this segment’s results onto the entire sample.

! These numbers seem extremely low and unlikely, but the goal of this estimate was to provide the lowest possible number 7our data would suggest

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The Range!

This means the annual waste in American healthcare on unnecessary imaging costs society between $7,470,000,000 – $11,950,000,000.

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FIGURE 4: How much of your total imaging volume do you think represents unnecessary imaging?

Percentage of Imaging Volume Considered UnnecessaryN

umbe

r of P

artic

ipan

ts

0

22

44

66

88

110

Imaging Percentage

0-5% 6-10% more than 10%

What Causes This Problem?

Identifying a problem is just the first step. Understanding the cause of the problem is critical to building a program to eventually eliminate (or at least greatly reduce) the problem. Physician leadership and other providers overwhelming highlighted just three prominent culprits of inappropriate imaging: (see Figure 5).

1. Defensive Medicine - Doctors are, with good reason, nervous about making mistakes with patient care so they err on the side of caution (ordering more scans than are necessary). Getting called into a review board or being named in a lawsuit tends to make one cautious.

2. Patient Demand – With resources now available on the internet for patients to research medical issues, many figure out the scans they want and demand their physicians order them. Remember the explosion of 64-slice cardiac CT requests by patients after watching that Oprah special?

3. Imperfect Information – It’s becoming nearly impossible for clinicians— particularly primary care physicians, internists, and the like— to stay abreast of all the advances in imaging. This isn’t because they’re incompetent, it’s because these physicians are overworked and see countless different kinds of cases every day. Plus, almost none of them have the requisite clinical decision support tools installed in their EHRs to assist in ordering the right scan type.

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FIGURE 5: Participant responses when asked “What is the source of unnecessary imaging?”

Defensive Medicine

8%

92%

Patient Demand

35%

65%

Inexperienced with Tests

40%

60%

The above reasons are exacerbated by a payment model that encourages volume over quality. The current, and extremely painful, trend towards quality-based reimbursement models should hopefully assist in alleviating inappropriate imaging.

None of the other suggestions coalesced around consistent issues. Rather, most of the comments actually directly related to the three groups detailed above.

The key takeaway from this is that defensive medicine is the biggest cause of this unnecessary imaging. However, patient demand and lack of understanding on the part of physicians are also key factors.

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Who has Solved It?

Figure 2 mentioned that 16% of those who said reducing unnecessary imaging isn’t a top strategic priority suggested their organization had already put a solution in place to correct the problem.

These 16% (12 people total) were then prompted to state which vendor they had used. Six respondents answered (1 CIO and 5 Chief Medical Officers). All suggested they did so on their own with a mix of homegrown technology and process improvements without the assistance of an outside vendor.

That no vendor was mentioned shows how truly greenfield this area is. It presents an incredible opportunity for innovative healthcare vendors to jump in and assist in providing a solution that will have a tremendous ROI.

Managing Radiology and Imaging!

In asking about imaging, it seemed proper to assess how providers are managing radiology. Therefore, this study asked every participant about two different aspects of radiology ordering and service-line management.

Electronic Ordering Totals!

Unsurprisingly, most feel electronic exam ordering is an important tool in eliminating unnecessary imaging. For that reason, we asked respondents how much electronic ordering they do for outpatient imaging. (see Figure 6)

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FIGURE 6: Responses when asked “What percentage of your imaging is electronic?”

Percentage of Imaging Volume Electronic

Num

ber o

f Par

ticip

ants

23

45

68

90

Imaging Percentage

less than 50% 50-80% more than 80%

RBM, ACO, or Other!

We also sought to determine how radiology imaging services are managed within an organization. We found that a third have moved these services under an accountable care organization (ACO) model with nearly the same number stating that they manage their imaging services in a more traditional way using a Radiology Benefits Manager (RBM). Most listed other ways of managing imaging services such as contracting with an outside radiology group, while many others stated that they are in process of moving towards an accountable care model. (see Figure 7)

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FIGURE 7: Responses when asked “Are your imaging services managed by a Radiology Benefits Manager (RBM) or are you part of an ACO?”

Management of Imaging Services

Other 40%

RBM 29%

ACO 31%

Conclusion

From this data, it is clear that unnecessary imaging is a big problem. It costs the United States government and people somewhere between $7.47 billion and $11.95 billion dollars each year. These are big numbers and that in and of itself can be rather daunting. However, the silver lining in the data point to some very specific solutions that can help to eliminate this waste, namely aligning reimbursements with results, and perhaps most importantly providing doctors with easy-to-use technology that will enable them to order the right exams at the point of care. Simply put, physicians want to do right by their patients but most of them don’t have tools that help them do this.

We’d be remiss if we didn’t bring up how tort reform could assist in reducing healthcare costs as well but that’s another report for another time…

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Appendix A

Survey Participants by Title!

Unfortunately, many research firms spend their time getting input from people who can't make decisions. That's not the ReactionData model. Rather, we try to get feedback from decision makers and key leaders whose opinion can actually have an impact. For that reason, and in an effort to be transparent, this is a breakdown of the participants in our survey by job role. There were 196 unique participants.

Rest assured, the data that we collected is valuable and accurately reflects the opinions of key decision makers in healthcare.

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Survey Participants by Title

Attending Physician 4%

CIO 1%

Director 1%

CMIO 6%

CMO 68%

Department Head 19%

Appendix B

Hospitals That Participated!

The information provided by individual providers is anonymous and will not be shared. In addition, we want to maintain the privacy of those who individually chose to respond. That said, we felt it appropriate to list the institutions represented in this study. Thank you to the representatives of the following institutions who participated in this report:

!St. Bernardine Medical Center Texas Health Presbyterian Hospital Plano St. Peter's University Health System Jackson Health System Wyoming Medical Center St. Elizabeth Medical Center Excela Health University of Maryland Medical Center DeKalb Health Children's Hospital St. Luke's Hospital Children's Hospital Colorado North Country Medical Center Humboldt General Hospital Samaritan Hospital Children's Hospital - Minneapolis Trinity Medical Center West Orange Regional Medical Center Children's Urgent Care St. Elizabeth's Hospital Mercy Medical Center NorthBay Medical Center Suburban Hospital Good Samaritan Hospital Scripps Green Hospital Jersey City Medical Center Northern Inyo Hospital Memorial Regional Hospital Thomas Hospital Highland Community Hospital The Western Pennsylvania Hospital Mercy Medical Center - Clinton Tacoma General Hospital St. Joseph's Hospital - Breese

Margaret Mary Community Hospital Cary Medical Center Mercy Medical Center Merced Community SSM St. Clare Health Center - Fenton Rockdale Medical Center Providence Hospital & Medical Center Yuma Regional Medical Center Canonsburg General Hospital Holy Spirit Health System EASTAR Health System Warren General Hospital Peninsula Regional Medical Center Memorial Health System Baystate Health Homestead Hospital Essex Valley Healthcare Marion General Hospital TJUH, Methodist Hospital Intermountain Healthcare Hartford Health Care Corporation St. John's Riverside Hospital - Andrus Pavilion Yuma Regional Medical Center Medical Center of Central Georgia Yavapai Regional Medical Center St. Joseph Medical Center Mary Washington Hospital Community Hospital of the Monterey Peninsula St. John Hospital & Medical Center Knox Community Hospital Munson Healthcare St. Francis - Downtown Alameda Health System Flagler Hospital St. Augustine Sacred Heart Hospital

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Banner Baywood Medical Center Ed Fraser Memorial Hospital Primary Children's Medical Center Alice Peck Day Memorial Hospital Barton Memorial Hospital Jersey Shore University Medical Center Lowell General Hospital Baystate Medical Center Tahoe Forest Hospital District Bayhealth Mariners Hospital Share Medical Center Lake Charles Memorial Hospital Ruby Valley Hospital Atlantic Health System Lindsay Municipal Hospital Sutter Auburn Faith Hospital Beaumont Hospital - Troy Perry Memorial Hospital St. Luke's Cornwall Hospital - Cornwall Campus Klickitat Valley Hospital Sheridan Memorial Hospital Advocate Sherman Hospital Sharon Hospital BayCare HEALTH SYSTEM Osceola Community Hospital Cheshire Medical Center/Dartmouth - Hitchcock Keene I-70 Community Hospital Hancock Medical Center Vanguard West Suburban Medical Center Cuyuna Regional Medical Center Otis Health Care Center MUSC Medical Center Fremont Area Medical Center Good Samaritan Hospital Sierra Vista Regional Medical Center Kings County Hospital Center UnityPoint Health Reading Health QuickCare - Berkshire Heights UT Health Northeast Northeast Georgia Medical Center Richmond University Medical Center Wellmont Health System Commonwealth of Massachusetts, Department of Public Health Regional Health

Swedish Medical Center Golden Valley Memorial Hospital University Hospital of Brooklyn SUNY Center UPMC - Horizon UHS Chenango Memorial Hospital PeaceHealth St. John Medical Center Martin Health Systems Children's Mercy Hospitals & Clinics Rice Memorial Hospital Erie County Medical Center UC Davis Medical Center Broadlawns Medical Center CarePoint Health Texas Health Presbyterian Hospital Dallas UNM Hospitals Phelps County Regional Medical Center Ochsner Health System Elliot Hospital Davis Health System City Hospital Shriners Hospital - Salt Lake City City of Hope National Medical Center Audubon County Memorial Hospital Scotland Memorial Hospital Phoenix Children's Hospital Shands Jacksonville Medical Center Genesis Medical Center - Illini Campus Benson Hospital North Caddo Medical Center Redington-Fairview General Hospital Children's Hospital of Wisconsin - Fox Valley Community Hospital - East Arnold Palmer Medical Center Sanford Bismarck DMC Rehabilitation Institute of Michigan Madison Valley Hospital Pocahontas Memorial Hospital Memorial University Medical Center Valley Regional Hospital Avera Flandreau Hospital Clarinda Regional Health Center Choctaw General Hospital Mercy Hospital Springfield Fairview Lakes Medical Center Swedish Medical Center - Ballard Coliseum Northside Hospital

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The Wisconsin Heart Hospital Morehead Memorial Hospital McKay-Dee Hospital Center Lifespan Lee Memorial Hospital Weeks Medical Center Hutchinson Community Hospital Edwards County Hospital University Hospital Cape Cod Hospital Adventist Health System Rockville General Hospital St. Francis Hospital Surgery Center of Des Moines - East OhioHealth O'Bleness Hospital Washington Regional Medical Center Murray-Calloway County Hospital Sylvester Comprehensive Cancer Center

Firelands Regional Medical Center - Main Campus Beauregard Memorial Hospital Kewanee Hospital Ellinwood District Hospital Red Bud Regional Hospital St. John's Hospital - Berryville Mary Bridge Children's Hospital & Health Center The Moncton Hospital Molokai General Hospital Grady Memorial Hospital Clear Lake Regional Medical Center Arkansas Surgical Hospital Central Maine Medical Center Nicholas H. Noyes Memorial Hospital Platte Health Center - Avera Marlboro Park Hospital Exempla St. Joseph Hospital St. Paul's Hospital !!!!!

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